Q1 2022 Full House Resorts Inc Earnings Call
[music].
Good afternoon, and welcome to full house resorts first quarter earnings Conference call.
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I'd now like to turn the conference over to Lewis Fanger CFO of full house resorts. Please go ahead.
Thank you and good afternoon, everyone welcome to our first quarter 2022 earnings call as always before we begin we remind you that todays conference call may contain forward looking statements that we're making under the safe Harbor provision of federal Securities laws.
I'd also like to remind you that the company's actual results could differ materially from the anticipated results. In these forward looking statements. Please see today's press release under the caption forward looking statements for the discussion of risks that may affect our results also we may make reference to non-GAAP measures such as adjusted EBITDA.
A reconciliation of those measures. Please see our website as well as the various press releases that we issue and lastly, we're broadcasting this conference call at full house resorts Dot Com, where you can find today's earnings release as well as all of our SEC filings.
Now with that said I was going to talk about our newest news really quick with circa sports and I'll, let Dan go into operations.
Our growth projects, but.
We did just announce today, our newest agreement with circa sports to develop and manage the onsite sports book at the temporary as well as an American place if you've been to the circa resort here in Las Vegas, you will know exactly why we're working with them. They are an amazing sports book here in town. It's the largest in the world. It's three storeys tall with a podcast Judy.
No.
Fun and Great Sports book, and they really embraced sports.
We haven't seen in person you need to.
But they also have a mobile app in several states as a part of our agreement they will use our expected sports skin in Illinois to launch their circa sports mobile sports App throughout the state.
Then.
Usually we don't go into some of the details of these agreements but.
Because of confidential confidentiality clauses, but this was a larger one and so disclosure wise, we think it's wise to give out some of the details.
This agreement had a $5 million market access fee that was paid last week upon the contract signing.
As typical what those market access fees will amortize it over the eight year life of this contract. Once operations go lives also similar to our other skin agreements, we do share in the revenue subject to an annual minimum that minimum is $5 million per year, which of course also doesn't start until operations begin beyond the eight year initial.
Term there are two potential four year renewal periods, both at circa sports as option and so for those of you keeping track. We do have seven total skin. This one that we expect in Illinois, three in Colorado and three in Indiana, We're getting back one skin in Colorado and one skin in Indiana, we get both.
Those back in the middle of May as we previously reported.
So when you total all of the annual minimums from our various contracts, we're sitting at $9 million per year, not including anything incremental from the two skins at six in mid May we certainly hope and believe that we will find a replacement operator in each of Indiana, and Colorado and so we do think that the 9 million figure should go higher.
Do you want to.
Just pointing out the free market access fee that we have.
Charged on each of these agreements is not refundable so.
We don't take it into income gap has the sandwich sensitive with the life of the contract but but.
It's not refundable and so there is.
Similar market access piece I think it was a total of $3 million on the Churchill deals sure.
<unk> opted to exit the business.
Just a little bit surprising because they relate the first people in it but they are exiting the business. They don't get that back. So we will take an income.
And their cases $1 6 million that was still unamortized as of December 31st Jeff and we take that in a tweak in the first quarter and then they told US they were out and may 15th when they discontinue operations, okay and so.
There is that and we are talking with other companies to replace them. So ultimately.
There should be a little bigger business, Matt, but we're excited to work with circus, you havent been down town to see their place.
Just to put it in perspective, and you may recall, we live in Las Vegas.
Been here, a long time, but they are the most successful new casino to have opened in Las Vegas since when opened in 2004, there's been a number of failures, but they kind of focused on sports betting more than anyone else and so it's all over the place it's up other pool, it's in their casino.
And it works and they are private company.
And but they probably they do it really better than anyone else and so we're pretty happy to be partnering with them.
Well, let me go back to the quarter.
Yes.
It was a pretty decent quarter, except that we're up against a really strong quarter last year.
But but we were down in the.
The biggest piece of that was the silver slipper.
And.
If you look at the skin.
Get to repatriate if you look at the overall <unk>.
We were at $10 four versus 12 point.
Six or 12, 7%.
Most of that was at the silver slipper, which was down $1 six <unk>, Colorado, which is very joined up with the construction I mentioned a minute.
It's down a couple of million dollars.
Nevada, which suffered from a win percentage swing.
Swing was down about 400000.
Indiana was flat so let me address Mississippi.
There were five things that I think are worth noting.
Last year, the government stimulus checks came out in the middle of March.
And we definitely saw a lift in our business at that time.
Yes, so left lift right away and then continued strong through April and then kind of petered out gradually over the year.
Hard to know how much of our <unk>.
$30 million.
We did $30 million of <unk> at the silver slipper, just under $50 million company wide.
Some piece of that was related to.
Stimulus checks maybe.
Maybe a couple million 3 million something like that but thats, a guess, we don't really know.
But in the first quarter.
Our slot win at the silver Slipper was flat our table game win at the silver Slipper was flat so that despite the fact that there were stimulus checks issued in the middle of March last year property had flat revenue.
In terms of slots and tables, which of course is the bread and butter and so that was actually not a factor in the quarter.
Even though everybody was kind of like well last year, we had the stimulus checks, but when you really get into the numbers.
We did okay. This year with up to stimulus checks.
Almost all of the swing in revenues was our onsite sports book.
Where we have the closest online onsite sports book to New Orleans, and Baton Rouge and it opened.
Five years ago, it's grown to be a nice segment of the business there and they legalized.
On line sports betting in Louisiana, There was a build to do the same thing in Mississippi and it didn't pass in Mississippi, because the industry Couldnt get their act together, but in Louisiana. It passed in an open.
At the beginning of the first quarter and that pretty much hurt our business quite a bit.
And so we were down.
65% in terms of the tickets written.
At our.
Onsite sports book.
We share that with William Hill, who actually runs it so we get a piece of the income when they get a piece of the income.
Now given that it's down and I think it's probably perpetually down because.
Until Mississippi allows online and even when they do allow online population of Louisiana is bigger than Mississippi, Mississippi is about 3 million people in Louisiana is about $4 five of course, a lot of that population, Louisiana lives, a long ways from us like Shreveport, but but.
The fact that Louisiana proved it in Mississippi Didnt.
Hurt us if Mississippi had approved it.
We probably still would have been hurt but not by as much.
And so.
To put it in perspective, though of the $30 million of <unk>.
At the silver Slipper last year, one four was from the sports book and so if that drops by.
65%.
Then that would be $1 million out of the 30 and that might be a reasonable guess I mean, the swing in the quarter was 400000 now part of that and income from the sports book.
The win percentage was a little lower than normal in the first quarter has things like the Super Bowl in it. So it's seasonally a little stronger. So I don't think youll see that biggest swing every every quarter I think it would be more reasonable to expect that we're going to make something like half a million dollars at the sports book, there instead of a $1 four and it just.
What it is and Thats perpetual.
Another thing I'll mention that as an <unk>.
Ongoing issue.
And that was our insurance costs, our property insurance is up significantly and in the quarter at the silver slipper alone. It was $280000 the increase was $280000.
And we're not alone on this I think a lot of companies who are dealing with this.
Theres been a number of.
Hurricanes and flooding incidents of the insurance companies are upside down and then on the flip side when interest rates are low that is a negative for the insurance companies. So they have been ramping up their cost of insurance pretty steeply.
Last couple of years really.
And it's affecting us kind of across the board no I know having been dealing with this for a long time, especially on the Mississippi Gulf Coast Theres kind of a long sine wave oddness in other words <unk> couple of years, where there isn't a storm.
And at this point with what they're charging us twice as much for our insurance as they were a couple of years ago.
And if you go for a period of time without a storm than competition starts to set in and you'll get better insurance rates.
And I think in our unique case as we get opened in Illinois, and as we build out the.
Chamonix in Colorado, we get bigger and more diverse.
Less reliant on the hurricane area of Mississippi. So I think we can do better going forward and I also think we're kind of at a peak in the long term sign wave of what the insurance companies can charge given what they're charging today I think it's probably a pretty profitable business and people will come into the business, where it was in the last couple of years.
We're exiting the business so.
But that is.
I don't think a perpetual thing.
But I think the rate at which insurance cost improve will be years not quarters. So for at least the next few quarters, we're going to struggle with.
Cost of insurance.
The.
The other one is rather unique.
And thats the price of crap.
Food cost was up $800000 of silver slipper in the quarter.
Yeah.
All of that was crap actually crab was up grab accounted for about 110 presented the increase in food costs.
We used to buy crab at $8, a pound and that we're buying and the $17 a pound.
Very popular part of our buffet, our buffets very popular.
For the 12 months ended March 31. The recent 12 months ended we spent $4 $6 million of crap, we went back and looked at the 12 months ended March 31, 2021, we spent $2 $4 million on Kraft. So the amount of crap, we bought was up $2 4 million.
Ah.
And that was a significant.
Significant caused that caused over half the swing in income at the silver slipper, So what's going on with first off what can we do about it well.
We could try offering other things people like Kraft there are local crafts, but they are tiny little crabs, and we've kind of made a name for ourselves by offering the snow crabs, and dungeness crab, which are much bigger clause.
But if you look at the crab industry that when people do have supply chain. This is a supply chain issue for us.
Because in.
2020, there wasn't any fishing he couldnt go out on a boat with a bunch of the people in <unk>.
That was kind of okay. Initially because there were no restaurants open either and people tend to eat crab more in.
In restaurants than they do at home.
And so.
And there were frozen inventory.
Kraft comes from frozen inventory anyway, certainly all the crab. We serve is frozen we don't we don't think really little things all the way from boots itself and the Mississippi.
Tractor trailers full of frozen crab.
And so the crab, we are serving today, we probably bought four or five months ago, it's been on a warehouse in Mississippi.
It came out of that.
It was a Crawley thing one to two years ago.
So this is very different than than buying crabs.
Marketplace in Seattle.
And so when you first had an absence of fishing you also had an absence of restaurants and to the extent crab was still being sold that depleted the frozen inventories, but what happened in 2021. The restaurants are all open to everybody wanted crap again, it didn't have any frozen inventories and the crab season is now not in the summer.
And so.
The price of crab doubled from eight Bucks a share to 17 Bucks a share.
Looking around the something.
A restaurant chain with grab and their name who is like really doesn't know what to do right and.
And we've just got a bit the bullet we did do some step we stopped offering two for one buffets mid week now.
Now we've stopped having crab on the buffet mid week, but 65% of our buffet as comp for casino customers and so what we charged to go to the buffet is kind of irrelevant irrelevant for two thirds of the <unk>.
People using the buffet.
And so to some extent we're just.
We will just muscle through it.
There is.
I found another little factor there is some snow crab that comes to this country from Russia.
But as near as I can tell it's not significant enough to move the market. It was a comment I heard when I went looking at it I don't think that's been a factor or will be a factor in it.
In fact, it's the opposite now because people are out pushing now and guess what a lot of crab and they're a little bigger crab because of the pandemic nobody was <unk>.
<unk> form.
So I think we're going to have a pretty good crop season. This year and eventually the inventories get frozen inventories get rebuilt, but you're kind of you're trying to fill the inventories while you're also filled the supply chain. So if you go out to a restaurant and order crab, it's pretty expensive. These days in most restaurants.
Much higher than it used to be but people are still ordering crab and so theyre trying to fill the current demand and rebuild the inventories and it will take a little while.
But eventually I suspect it gets back to where crab is $8 a pound maybe it goes to $9 without because oil is more expensive than the crab boat shoes gasoline right, but there's no. Other reason long term why the price of crab should be twice, what it is and it's kind of funny because I went looking to see if inflation.
Was a factor no our payroll costs are up less than 3% the cost of all of our other stuff.
Has not changed much it really came back to Kraft and I think Thats a short term thing.
And in fact, we had the price of crab escalated in September . So we have one more quarter to deal with the price of crab year over year, and then we should be better.
Better situation in the second half of this year. So the biggest factor episode Slipper and really company wide in the quarter was ironically, the price of crab and I think in short term.
And.
And then win percentage effect at the silver slipper little but but.
It's where we talk about what percentage because usually with portfolio theory once you get through.
Having four or five properties that evens out and then if you start adding together different quarter. So over the course of a year and companywide, we see very few swings and win percentage. This was a quarter, though where companywide.
It was about $2 million back to if you look at the revenue line.
The segment, but.
The total income statement casino revenue was down about $3 million to.
Two of that was companywide wood percentage and the rest was the sports book in Mississippi.
When we get so that explains the silver slipper I mean, it was really crab and sports book and then property insurance.
Those three things account for 100% of the swing in <unk>.
And the biggest factor is short lived up to the price of crab.
And the other two are.
A little more long term.
In Indiana, we have a very good result with flat.
It is good because you remember we had stimulus checks last year. This time and we also have an increase in.
Insurance cost there and the.
And yet despite that.
And we did fine.
With a good percentage number was.
Yes.
The big swing down would have been on the table at the table game side. It was.
17 percentage point, sorry, 16 percentage point difference and hold this year versus last year.
When you look at both slot and table it was roughly $850000 of.
Lost revenue when comparing this year to last the property offset that and they ended up the quarter with flat income side Thats, why I view flat as being actually pretty good because they offset some some headwinds and came in just fine.
Colorado.
As quite torn up with construction at this point.
We have no onsite parking.
We're running valet parking we have a parking lot three blocks away that we are a shuttle bus too.
The market as a whole is doing very well since April of last year, when they got rid of the betting limits and so were down despite the market being up and Thats a direct reflection of how torn up the property is we've actually torn down.
A good chunk fell 25% of the Bronco Billy's building.
Was torn down because it will become part of Chamonix.
<unk>.
And then this is a seasonally slow quarter there and so that's the only reason we had a loss that we won't have a loss over the year, but it was so wouldn't expect much income for the year I think we will have something.
But it.
It's kind of irrelevant, we're building at 250 <unk> place do we really care, whether we make money. This year, obviously, we care and we're doing the best we can.
Construction people of course would prefer to just close it that would make their life easier.
But we have a couple of hundred employees there have been loyal employees to ultimately we want them to be part of Germany, and our customers. We have very loyal customers, who we want them to be Protos, Germany, and so we are.
Expecting and willing to have this construction disruption this year in Chamonix should open about a year from now and.
And.
We will have a much brighter future at that point.
In Nevada.
Nevada.
<unk>.
Grand Lodge at the Hyatt Tahoe actually had a pretty good winter.
Okay ski season are certainly better than the year before when the pandemic inhibited capacity the ski areas.
But it had a pretty big win percentage swing there.
Cost at like $600000 in revenue in that.
Accounts for pretty much all the swing in income and so northern Nevada was okay, except for win percentage, there really wasn't anything else going on there.
On the contrary.
Contracted sports Wagering, we talked about lots of different things coming and going last year, we didn't have all the skins up and running.
This year, we did going into the quarter at Al <unk> skins, and then two of the skin said they were going to discontinue their business and then we signed the deal with circa so that's all the different things going on there.
And corporate was about flat.
Really the more important things in the company.
Is that we have these two major things that we're building.
We got that.
It took us longer to get started in waukegan than I would have hoped.
But I understand it this is a big project for the city of Waukegan and Lea County.
When we went in and said, okay, we want to get Glenn really quickly.
They hired outside parties outside lawyers outside consultants as they should and those people also like what we want to review the whole plans, we're going to see the whole.
Laying out the parking lots and so on before we let you start construction on the foundation. So the irony is the sprung structure is completed and ready to be delivered we don't have a foundation to build the non yet.
We got the building permit Friday, the 10th of the defense and erosion protection stuff is going up today, which allows us to be putting in the foundation. This week and when you take that timeline out we had hoped to be opened in the summer it's going to be the fall. If I were to guess at a month, it's probably October .
And it might be late in October , but it's somewhere around in there.
But the good news is we're now underway finally and.
There I think the supply chain issues. We've been ahead of the curve as I mentioned, we have the 10th which which will close in <unk>.
Area. Besides one five football fields, we will have 1000 slot machines 50 table games, three restaurants 20 acres of parking.
Kind of a big deal.
And we will get open as quickly as we can.
<unk>.
Having gotten the permit at this point.
I think that was the biggest hurdle is not only the city, but also the gaming Commission, which we got their approval and so we're often running now.
I think we're ahead of the supply chain issues. We got the 10th we have a floor that goes in it's kind of a raised floor if you've been to <unk> at the Las Vegas Convention Center. When you go in and look at the slot machine manufacturers of stuff. That's all on our raised floor in other words. The convention center here is a big concrete floor.
They bring in this kind of a it's a plastic sort of thing that raises you up like four inches and that allows you to run all the cabling.
In it to get to all the slot machines and that's what we're doing because it's the most efficient way to do it and we were able to find.
This is three acres of raised floor that we own now.
And we've been dealing with the slot manufacturers to make sure we can get the slot machines.
One of the Bill.
Elevating companies as having supply chain issues out of Japan, Fortunately, that's not the one we're using so we think we're in good shape there.
And.
And so we've started to hire people. We've added a number of department heads now and that will continue through openings. So so that's.
You could talk.
Recession or inflation or any of that stuff far more important for us and for our stock is getting waukegan open because it's the closest casino to one 2 million people.
It will do well.
So we're looking forward to that and then the construction is still ongoing.
Our pace in quite well in Cripple Creek, it's on track to open in the second quarter of next year.
We're also just starting to renovate Bronco Billy's itself. So we're going to have additional disruption within bronco, Billy's, but it's going to be significantly better when it's all done.
And.
And you can see those on the website a couple of different websites, we have but the one that used to go to is just chamonix.
<unk> dot com color.
Chamonix, Colorado Dot com.
Theres links to the webcams here, where you can see the construction in progress the elevator towers, which are they're all those things on the project or are done the guestrooms are getting filled in.
You can't see it from the web Cam, but behind the main building as the meeting room space and it's getting filled in and closed and so it's coming along pretty fast now and.
There we were a little concerned whether we could find the manpower we actually fund the manpower just fine.
And we've had some issues with getting the light gauge steel on time, but it really came from the architects who didn't finish the dry in some time, but we've overcome those and we're doing better.
And so we are.
On track to open in the second quarter of next year and we are.
We've had a couple of little bumps on price, but we're pretty close to that $250 million number.
Well within the contingency so I think we are.
We're in good shape there.
No.
I think of anything else to say about Germany, it's pretty exciting because we're now starting to buy some stuff in fact.
I'll find a way to put a picture of.
We have a piece of art that was like $300000 as part of the budget that hangs at a prominent spot and the place that's made a solid gold because its a gold mining town or near a big Gold mine.
We want something kind of stands out so we're getting into kind of the exciting stuff and this is art.
Right.
Steve when art, we did at Bellagio, it's much less expensive, but it's going to be a pretty showy thing and it's kind of fun. So that's coming along.
Rough day to report earnings rough day in the market.
And.
So I know everybody just wants to go have.
Scott or something but.
I will tell you the business so as we are.
Fine I mean, I feel like the Canadian lighthouse when the.
The ships was coming towards him and they announced on the frequency.
The ship that's ahead of us.
So many miles we suggest you of course.
And the other person set back.
Just you've you're of course.
Enterprise said this is the U S S enterprise.
America, an aircraft carrier and we have a whole fleet of ships suggest quoting US again, we request that you read changed course, and Canadian came back and said, yes. We are a function of lighthouse do what you want and it's kind of like okay. The markets all over the place where we have our money it's fixed rate our business is doing fine our business does fine during recessions.
Building this stuff, there's a sediments has yet to break down a little recession, maybe we can build this stuff cheaper right.
And so I think we're just fine and the stock is volatile but at the end of the day, we are building value for shareholders and the stock will reflect that.
The only other thing Yeah, let me, let me just tie rate a little bit about crazy gap.
No.
I will tell you will see the charges on debt restructuring and to me, it's a little illogical, but we issued another $100 million of bonds that are the same CUSIP as the bonds, we have outstanding now.
And as a result, some of the fees that are associated with the issuance of those bonds get expensed under GAAP and Thats why you see the charge had we issued them with a different CUSIP. They would've been capitalized which makes no sense to me at all but that is GAAP. So we followed GAAP and the end result is the.
Charge, we take this quarter.
That is basically offset by slightly lower interest expense over the life of the bonds and so it's kind of a big much Ado about nothing but that's what you see there.
So the only the only we couldnt and of course, the bond buyers wanted to be in the same CUSIP because it's more liquid.
Yes, the only other thing I was going to mention Dan is from a liquidity point of view, we still have a lot of cash and so here in real time, we're sitting on about $318 million of cash with $205 million that reserve for the build out of <unk>, but on top of all that cash we still have our $40 million undrawn revolver, the only thing being utilized on that revolver.
As a $1 million standby letter of credit for the build out of <unk>.
The temporary.
In Waukegan. So so we've got quite a bit of additional liquidity there, but that's all I had if you're ready for a question and answer any question I mean, the only real supply chain issue, we've been dealing with this crap yes.
And operator before you go to questions I actually got two emailed into me from David Bain, who is having a connection issue. So I get to ask your questions Dan Here's here's his first Dan, hoping we could leverage our experience with minor recession major recessions or macro events that impacted operations from Mirage Pinnacle full house.
Our three year general industry observations over the years for regionals. The impact is relatively benign based on historical gaming revenue data, but we're dealing with a fixed cost base and then every recession.
It never recession, it tends to be a bit different while real time trends are not worrisome, we're getting questions about the back half macro we would love to hear how you think about the world as it relates to the portfolio you kind of did that already but go ahead, but well recognized when somebody goes to casinos were cheap trip, where an easy trip you get in your car with two or three people in.
And drive there so it's not.
The cost of gas.
It's not driving very far so it's not a lot of gas that's being split between two or three people doesn't matter a lot.
Whereas.
When the price of oil goes up the price of air fare goes up proportionally more and you're buying a ticket for each person. So so it has a much bigger impact on Las Vegas, and then of course, a big part of Las Vegas Convention business as Amtech. There when you have a recession companies tighten up on who can go to conventions and so on so it is a.
Much bigger impact on Las Vegas than it does on the regional casinos in general.
And so we become the steady vacation at home or something so so if you go back and look at the recession in OE dollars nine which was the great recession. The biggest recession of our lives regional casinos did just fine and so I don't think.
I think well, let's see.
Not much impact.
Going through it now availability of gas and if you go way way back in history. When you when you.
If you are in L. A and you can only buy gas on even days of the week and you've got to be my age to remember those days well then you don't necessarily want to go across the Mojave Desert and find out if you can get gas to go home, okay, but nobody seems to be talking about the availability of gas.
They're talking but an and.
And so I think and even there it's kind of interesting recently.
What a new car and all of the manufacturers are shifting to electric and my other cars and electric car that is the wave of the future and so somewhere five years from now 10 years from now you're going to have gas stations that are empty and youre going to be charging your car up and youll have solar batteries in the top of your house. So for example in the parking.
At <unk>, we have a whole bank of places where you can charge your card because we think that.
Not too distant future, that's going to be important and so I think.
Yes, if you build the hotel. These days when you think of 30 years, you better be thinking about having enough power in that parking garage for people to be able to charge their cars.
<unk>.
And so I think they.
The availability against didn't seem to be an issue price of gas is an issue, but it probably works to our favor recession.
I don't know every time they talked about all these people trying to get across the border and not let them in because we need employees, but.
But of course.
I don't mean to be political of course, we don't want to just take the border down but.
But yes, we've had.
Unemployment is still three 5%, we do find employees.
It's a little bit of a challenge, but then we try to make sure that we are good employers. So we can keep the employees, we have and so on and so.
Not worried about a recession I'm not actually worried about interest rates I mean somewhere out there will have to refinance our existing debt.
The years away and we and we don't absolutely have to we could find other ways to finance the permanent one in Waukegan, if we had to leave our existing bonds outstanding, but we've always been assuming that we'll be able to borrow cheaper at some future date, when we're more diverse and so on and so we would just call the bonds we have.
And I guess, if interest rates went up a lot it might not make sense to call. The bonds, we had to keep a bunch of <unk> and you figure out how to finance something and the other thing so our balance sheet I wish I could say it was must've been Louis' brilliance, because we are perfectly situated today for what's going on in the world. We have the money to build these things.
And our debt is all fixed rate and so it's just a matter of getting them built.
So it all starts opening in six months.
Here's the second question and then we'll open it up to normal Q&A are there any changes that you would make now either in design and development of our operations to hedge for a softer consumer or is it pure execution mode based on real time trends.
No nothing really.
I mean.
Yes, I wish we could have figured out how to build Germany with less disruption to Bronco Billy's.
Isn't the way it is what it is.
And.
Silver slipper.
Solid.
We have been slowly working on getting entitlements to expand the silver slipper.
Someday, but we're so busy building the other two things that kind of on the backburner for now.
And.
And we do keep inching, our way forward different entitlements, but but I think even if everything cleared up tomorrow I don't think we'd start construction right away because we're busy trying to build that we have.
And.
Well, that's what they do.
Yes.
We are.
In pretty good shape and maybe some of it is brilliant and so some of that is luck, but but.
I can't think of what else they would do all of these.
These are all assets built for the long term and that's what we're doing that's what we're doing.
Once in a while we're offered different properties in Las Vegas, We live here. So of course, we look at it and it had operated casinos in Las Vegas before.
But.
This is not an underserved market anymore. When you think that California used to be half of Las Vegas visitors stay its still 30% of Las Vegas visitors in the 60, plus tribal casinos in California that are newer and just as a nice many of them are newer and just as nice as the casinos in Las Vegas.
This is kind of a tough market and so we've looked at a lot of stuff and not done it.
And I think that positions us well at the moment.
Now I'll never say never but I mean, if somebody offers to solar plus yield for $50 million, we try to figure out how to do it right, but that has not happened.
So.
Let's go into proper Q&A now.
We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad. If you are using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then two at this time, we will pause.
Materially to assemble our roster.
Our first question comes from Ryan <unk> with Craig Hallum Capital Group. Please go ahead.
Good afternoon, guys. Lewis you did such a nice job I thought about Juicy only my questions and letting me you guys.
Well, we'll press forward.
Curious so congrats on the circuit sports book I agree with you have been there it is absolutely fantastic and the best Sports book in Vegas.
<unk> people, so curious if youre able to disclose I guess scale and any plans you have on the one that will go in.
Your casino, if it's similar to that or anything to comment there.
Well the one in the temporary.
Trying to build that so quickly so that'll be it.
Pretty normal sports book.
We bought two air stream trailers that are like little.
Food trucks that will be located near it so that you can get a beer and.
Cappuccino pretty easily.
As creative as we are getting in this test because we're trying to build so fast now in the permanent casino.
Actually I am looking forward to working with Derek Stevens to try to figure out how to have the best sports book in the Midwest and.
Design is early enough there that we can do.
Do some things there to make it.
Really kick <expletive> sports book and it's fun.
It will be fun working with them because they really get into the details of it.
I Love people like this he went out of his way to like.
Pull a light bulb Bud light display to show, how it's get a little cover over it. So that you can see the bright lights in the sunlight of Las Vegas when he is open.
I was like Wow, let's get really lives and breathes this stuff which is great.
And so I think we have the opportunity to do something in the permanent debt will be the best.
Recent sports book in the Midwest and that's yeah. That's.
As Ive said many time on these calls that's a business we've been hesitant to do it ourselves because not only is it kind of a unique expertise but.
As a small company if we ended up.
With the team in one of our markets and the Super Bowl and we're not we're not in the <unk>.
And if the other team is not in one of our markets we'd be unbalanced. He has got enough of a business.
With a base of here in Las Vegas, where people come from all over that he doesn't have that problem.
Have a cup Sophie if he has a bad quarter because the wrong team won the Super Bowl.
Right and.
So.
So we're happy to partner with them and he has got a good online stuff.
Everybody knows draft Kings, but private company does pretty good job.
Yeah.
He has downtown.
I didn't quite realize our new up by the Supreme Court, we have this big design and they charged like 20 bucks to get out by the pool and.
That's up on the roof. When you go out there and there's like swimming pools.
And he kept them heated all winter law, so like normally swimming pools, and Las Vegas clothes in the winter.
And so people were out there sitting in heated water in like 50 degree temperatures watching football games in January .
That worked its all yes, it worked really well.
Go ahead Neil.
And he had to have the windows on that side of his hotel tower, the extra thick glass because he knew he was blasting.
Sound out by the pool and they didn't want to keep people up at night. So somebody told me that they had.
Dinner the other night in the Steakhouse on top of opinions and they could hear everything going on by his pool a block away.
He has got extra thick windows on his guestroom. So he doesn't really care so maybe.
Separately.
As Boyd, whereas the steakhouse and tap opinions and sticker windows.
Let's get this guy pays attention to his business I'd like that we try to pay attention to our business. So I think it's going to be a really good partnership.
And to your at the beginning of your question, we do expect Youre going to walk in to our American play Sports book and say Wow that is our goal yes, that's our goal.
Okay.
So.
Yes.
To follow up on that I guess, the $5 million annual skin fee does that include only sports book online sports betting or is that also I gaming, it's legalized and then secondly.
Circa half online sports betting in Indiana, Colorado or does that opportunity with the philosophy, which helps Kim.
No.
They currently there and theyre not in Indiana, They are in Indiana and Colorado.
Sure.
Okay.
And I'm pretty sure they are up and running.
Yes.
They are not interested in being with us in Indiana, and Colorado, I think they are up and running.
If they're not it's because they probably have a deal with somebody else.
There are other companies, we are talking with for Indiana, and Colorado that is true it is not.
They are not in Internet gaming that I'm aware of but our agreement is strictly for sports betting if internet gaming becomes legal in Illinois.
We would be able to do that separately.
Yes.
Good one more for me kind of switching over to the core business.
Anything you've seen in March into April and even early may given all the macro challenges anything impacting the consumer that you've noticed.
I will tell you April last year. It was one of the best months in this company's history.
I think that was the stimulus checks that came out in mid March.
No we don't have our.
Month closed yet, but I think April is going to be a little behind last year.
Early in the quarter and I hope, we can make that up but I think given our budget showed us being down a little bit in second quarter. So.
We have a little bit of a.
I mean, what those stimulus checks were for us I don't know, but I mentioned earlier it might have been $3 million of income.
And a good chunk of that would be second quarter comparisons.
Apart from that April was actually pretty decent month, but you're kind of looking at it and say well some portion of the revenues last year were kind of a blip over any April in any year before that and so this April compared well with any prior April except last year okay.
Sure.
Other than that I mean, if there is.
You got to remember a year ago, you still had mask requirements in some places we don't have that now.
People are back to their normal lives.
The senior citizens, who were who disappeared in the pandemic because they were afraid of getting sick and dying.
Theyre now vaccinated in there out of that.
<unk> segment is back for us.
Back to where it was pre pandemic, which is a good thing.
And we've kept some of the younger people so.
When I look at the April results, the only thing I see that stands out a little bit as we definitely got a lift last year from the stimulus checks in and I know that the.
The big infrastructure Bill was another big government.
Surge of money into the economy, but it's not immediate.
Didn't get a check in your mailbox and thats going to be customers of ours, who.
Get a contract to build a new bridge or pin New road that will eventually end up in the economy and eventually end up with us, but it's not the same as the stimulus check in terms of the immediacy of getting into People's pockets and ending up in our in our casino and our slot machines.
And I recognize.
Yes.
It's not like everybody's got a stimulus checks and went to a casino.
Some people went through stimulus checks and went to a casino right.
I think if you were to.
If you could get the best buy numbers I know the best by the year had a line of people trying to buy televisions and I think it was probably a much bigger positive for best buy than it was for us.
But it was a positive for us for sure.
Thanks helpful detail has always been Louis good luck guys.
The next question is from Chad Beynon with Macquarie. Please go ahead.
Hi afternoon, guys. Thanks for taking the question.
Louis you mentioned.
The current status of the balance sheet, you're at $318 million of cash so that kind of indicates that you haven't spent much on Germany can you just kind of help us think about.
How the Capex should look through the remainder of 2022, and what will slip I guess more into 'twenty. Three. Thanks, yes, yes. So we did spend roughly about 15 million Bucks for what it's worth this is the point, where it really starts to ramp up so here in the second quarter look at Homelink as I say it but my gut says we're about 'twenty.
5 million Bucks of Capex here in the second quarter.
Ramp up towards $45 million of Capex in the third quarter and then.
A little more from that in the fourth quarter. So it is starting to get in ramp up phase and if you think about it.
From a from a site level point of view as you get more people on site showing up not just for the steel, but now people on the inside with electricians, and plumbers and that sort of stuff thats that by having more cars in the parking lot and people working thats. When you see the number really start to go up so.
But rough rough figures that that's how it's looking to ramp up from here I mean recognize the commitments we've made quite a bit ahead of the money that's actually been spent.
And so you commit for somebody to make a light fixture or furniture or steel right and so some foundry somewhere is making steel to our specifications, we have to buy that but we don't actually pay for it until it's delivered to the property.
And accepted by Us.
<unk>.
And so the commitments are.
If we looked at the construction in progress to update at the end of March.
Gemini showed well we have some small number it was like 10% of the $245 million okay.
Okay. So we've spent spent out the door 40 foot above the $250 about 40.
Our actual commitments that we would be obligated to.
Pay for if we stopped construction for example is probably at least 45 million.
Yes.
Yes.
So it's.
So we're well into it at this point.
Pretty close to the point, where.
We will be able to have the.
Total GMP from.
Our contracted Pensacola counsel felt yes.
And so I think most of the risk is behind us at this point.
And then if it helps you as well Chad for the temporary were about $7 million of spend here so far of the 100.
The big number the fee that due to the gaming commission that doesn't happen until after the doors open, but what was that number Alex $32 million definitely after it opens I think $32 million in the slot machines or 'twenty, yes pay for those until the delivered yep.
And so here in the second quarter, you could have a sizable number so far it's just a lot of deposits, but you could have a number that's in the ballpark of 30 million Bucks here this quarter and then the balance.
Three key issue, perhaps right October opening.
Okay, and Lewis sorry, if I missed this what was the reason why the opening date got pushed back was that just more certainty and giving the licensing and the permits and everything just going to be higher later than I think what you said.
Yes, maybe I was a little optimistic I was like okay, we need to get this tent here. So we actually paid them a little premium to get the <unk> quickly.
<unk> has to go up on a foundation.
We went to the town. So we just want to build this quick Wringing Foundation. So we can start building. The 10 and then we will design the parking lots and everything else and they were like not hold that we want to look at the whole thing we view it in its entirety, we need to first hire outside consultants and there is a process. They have to go through to higher outside consultants as a municipality they can't just.
Pick somebody they have kind of their own little RFP in and so they hired outside consultants, who had to get up to speed on the process and like literally.
So we designed all the parking lots and then theyre outside consultant wanted the handicapped parking to be in a different spots.
People in their wheelchairs wouldn't have to cross any traffic.
Pointed out that that's not actually what the Ada code requires.
Wanted it to be very much like Red rock casino here, which works very well and we went back and forth that bench.
Essentially we got there and we put the building permit on Friday and by the way they've been working with us.
They've been very good work with as has been the gaming Commission I think we were a little too optimistic about how quickly we could get going with hindsight they were probably right in fact.
We got a message from the gaming Commission at one point that was actually very clear and they said we're rushing in Russia, and saying you want the gaming taxes and you want the employment in there like.
It's more important that you do it right then you do it fast and I remember I got that message, Okay, that's pretty clear.
Very simple statement and so we were like okay take a deep breath, let's design.
Mr equivalent and so on and so.
So we now have I mean, it took us seven weeks longer than we had hoped in order to get the permit to put this in and I think that was a function of us being overly optimistic of that process and I think the.
And of.
Forced us to go down to more of a methodical process, which with hindsight was probably the smart thing to do anyway and.
And as a result will open in the fall instead of the summer.
Yes.
Yes.
<unk>.
This leads into the permanent and Thats, a 30 year business. So whether you opened in October .
July .
In the Grand scheme of things.
Overall shareholder value, it's more important to do it right and do it fast.
Agree.
And then.
Separately.
I think we've we've heard from all of the operators a lot of your competitors and other companies in other markets. It sounds like the reinvestment rates for players Hasnt really changed and everyone continues to be rational I guess, the big market for you guys in Mississippi.
You called out some of the things that caused a little bit of a decline, but within that region is biloxi and base Saint Louis being rational at this point and then the properties across the Louisiana line as well.
Yes, we recognize we compete more probably with harrah's in downtown New Orleans, and the fairgrounds and we'd do it blocks blocks is quite a ways east of us.
And even the casinos in Baton Rouge are probably more important competitors than Biloxi.
St Louis and.
Gulfport are important and yes, they are being rational.
I mean.
<unk>.
We deal with is a little bit like.
Should we stop offering crap.
Should we put.
Quantity limits on the Kraft, but two thirds of the buffet is capped and so we've kind of just the bullet.
Crap and hopefully its only for at these prices for a limited period of time.
Because it's important to our customers, so maybe thats being a little irrational.
Put it in perspective, our buffet is now $50 on a weekend in the evening.
The average person to buffet each two pounds of crap at.
At $17, a pound thats $34 with the crap before you get to stakes or any other cost of food let alone. The payroll. So if somebody really does eat two pounds of crab and on average they do were upside down on the perfect.
I can raise the price even more.
But two thirds of its comped anyway, so it doesn't matter.
Take crab lobster buffet and our current earnings to be better, but that's kind of what were known for and so it's kind of like we will sustain the pain for a little while longer and hopefully is going to catch a lot of craft scrap seasons right now so hopefully.
This will come back to normal so okay perfect. Thanks, guys and congrats on the circuit partnership.
Great. Thanks, Chad.
Next question is from Edward Engel with Roth Capital. Please go ahead.
Hi, Thank you for taking my question, just wondering with Golden Nugget acquired Wildwood in Cripple Creek I was wondering if you've heard of any development plans that they have for that property.
I haven't actually view that kind of positively.
Yeah.
Wildwood was.
Ah screwed up property.
They vary the parking garage underneath it which is like an odd decision because land in cripple Creek not that expensive.
There are three ways to park car should come to surface parking.
Really most of our parking even in Germany will be surface parking, but we do have a garage coming in.
And in surface parking is like two or $3000 of space.
You can build a garage that's about 30000 the space.
You can vary the garage.
Cosmo was built in Las Vegas with varied garage Palazzo at spirit.
And youre digging a big hole in the ground and putting a garage in that hole and then put in the hotel on top of it.
It's really expensive.
Not only digging the hole, but then you have to all sorts of special ventilation and even with the special ventilation and sprinkler and all that stuff its still not a very pleasant crash. I mean every time I go down to cast by I hate that garage.
And.
Why they would do that in a couple of quick I have no idea. So they've got a five story deep parking garage and the lowest Florida floods, all the time because it was underneath the water table.
And then they built a pretty simple casino on top of it I think they spent $80 million.
Robust really fast.
And then.
One of the key guys became kind of debtor in possession and start running it and they kind of got maneuvered and it got sold to a REIT out of.
Scottsdale, who owned it so it was kind of run by the Sky owned by a REIT and I think he saw what we were saying about how the town needs more hotel rooms. So he persuaded the REIT to build this little hotel with 100 rooms, it's a stick built hotel it's like.
Fairfield Inn at best and it's actually across the street from US casino, but we've heard that it doubled their income from like $5 million year to $10 million a year.
We're here, which.
Which is great I mean, it kind of proves our point that we're going to have a high end 300 room hotel and so watching there are little hotel opened a year ago. The income went up a lot and then.
Tillman Boswell Tillman is actually a pretty good casino operator.
Recognize I worked for Steve when I work before the Drexel Burnham, let's hit Mike Milligan biggest ego I've ever met was tilman fertitta right, but he is good at running his business. He is actually really good at running this business cycle hand that off to him and he would probably be proud to say, it's a big ego, but.
And so I expect them to come in and fix it up and do things with it and whats the REIT in Scottsdale, probably wasn't willing to do and I think thats, an important part of turning Cripple Creek into a better destination. So I think it's great.
Golden Nuggets, coming there and I would expect them to fix it up and he's kind of on the edge of town now he is on the edge of town as you've come into town.
But everybody wants to come down to the main street anyway. So.
It's kind of like the M resort.
It's in Las Vegas, technically it's on the strip, but it's not really where you want to be and so I think.
But I think.
A little bit of money into that property.
Enhance it and enhance the experience of the town and I don't think the REIT would have done it and I'll bet till Manuel and so when I heard that I thought that's probably a good thing and.
So.
But I've met Tillman a couple of times he is actually a nice guy.
Big ego.
A bad Guy.
Yes.
And maybe its earned the right type of behavior. So.
Great. Thanks for the color.
Thanks.
Dan technically we're out of time, but if you can keep it short we've got one last question Alright, alright.
The next question is from.
The next question is from David Levine with Midocean. Please go ahead.
Hey, David Hey, guys How's it going I appreciate the time.
A couple if I could squeeze in my first one just on the temporary anything left that we should know about that as kind of major in terms of approvals I noticed in the press release, just said subject to customary regulatory approvals I wasn't entirely sure.
What that related to I know that a lot of these are kind of.
Not a big deal, but just wanted to kind of confirm.
Has your outlook changed at all in terms of what you've called out in terms of what that temporary can do from an EBITDA perspective, or you still feel pretty good about about that thanks.
I feel really good about it I mean, it's fair.
Literally this was a better deal.
What it was when we got the deal I mean I was.
We got the deal.
Ben the Waukegan, a few times is kind of a down now.
Belt town, and then I sort of looked at it as like wait a minute late county, while keagan is.
The capital City of Lea County.
700000 people Kiggins only 80 miles in Lea County is one of the wealthiest counties in the country and you realize there are some neighborhoods pretty close to us that a pretty wealthy and thats like effect.
Uh huh.
Went down to Cosmos, we can specifically to China poblano, because we have a big American restaurant burgers and pizza of what you would expect and then we had another restaurant we kept labeling at ethic.
And it's like well what does ethnic because the population is 22%. Hispanic.
An 8% Asia.
But the Asians Gamble.
And so which is while China poblano as both the Chinese and Mexico.
It works pretty well so we actually have trademarked the name senior walls, and we're going to have senior work, which would be Asia and in Mexico right.
And so you start running into stuff like that.
The other regulatory they recognize in our business you need approval of the gaming Commission at every step of the way and as it should be right and so they're constantly looking over your shoulder and takes their approval I will tell you. So far well it took Illinois, a long time to decide who would get this license but since that.
Chose us they've been a very nice to work with the.
Agent who's assigned to us and very reasonable is not a pushover, but he is very reasonable and.
I haven't met him yet, but all the people that have worked with them.
<unk>.
It comes through when they need it.
Various approvals so I don't think that will be an issue.
Sure.
It's a union construction environment, which has its challenges.
We've found out that.
One of our subs was.
I hope to give a contract nonunion shop, and we had to stop headset. No. This was supposed to be Union, Jeff. It's Gotta go to Union, Jeff. So we have those.
Challenges, but.
But the big one was getting started and we've started.
And now we've started.
We have an Mou with the city for what the lease will be.
We have yet to have that lease finalized so our lawyers are working with their lawyers to finalize the lease but the Mou.
Is very much in line with what was discussed with the gaming Commission when the license was awarded.
And I don't expect it to be any problem, there, but actually a very good sign of how well the city is willing to work with us they are allowing us to start construction on the Mou. So we are starting construction on a piece of land, we don't know and we're not even leasing yet so we're starting construction on a piece of land that the city.
And intends to lease to us in accordance with the Mou. So we're all working together to make this happen as quickly as it can.
I don't expect there to be a problem.
No I will tell you that when we went through the we spent a day the other day going through the construction timeline.
It could slip into November .
It's also possibly be done in September , but I think it's unlikely.
Okay.
And I've kind of worst cases December but it's somewhere in that range in terms of like the customary approval thing that's like not just don't think that's really a big deal just from me.
Yes.
And to help you out David.
Illinois is one of those states as are many where you don't get your gaming license until the second before you open so youre going to see that language up until we opened.
Definitely you don't get paid down it will continue for another quarter or two you'll see that same language. When we refer to Colorado I think youll see that same language any casino company building any casino anywhere.
Subject to gaming approvals.
And if I could just squeeze one in on on Colorado.
Obviously, youre still kind of a year out.
So theres a lot to do but anything kind of major.
That we should be kind of looking for in terms of major milestones that.
Good.
Cause could cause issues or youll feel a lot more comfortable once you kind of complete.
I've probably asked this question over the over over the course of the last couple of months.
Just curious your thoughts on that.
Anything kind of major.
Timeline, where you feel.
Where you feel kind of like the major hurdles are coming.
Well for example, we just.
Or about to open up what we've done we're about to open a new table games of different private Bronco Billy's. So we can take the old table games pit refurbish it and we're going to be doing lots of stuff like that in the next year moving <expletive> around within Bronco, Billy's, which can be confusing for everybody, but it's what you have to do to to do it.
There is a milestone there is a point were getting there where we have as I mentioned the GNP contract from HP.
But otherwise.
We're kind of at the point, where this stuff is just on rail so if I just finish it.
I mean <unk> had the designer C&I did had an epiphany about two weeks ago.
One of the cages and Bronco Billy's was designed in the wrong place and the bathroom in the wrong place we swapped it.
Alright.
It was like an oversized second we'll ship that shouldn't have been there.
So we're kind of at the point, where you really try hard not to make changes like that.
Could you just want the construction people to finish.
And so there is.
Purposely trying to.
Keep my fingers out of it because I know that.
Change orders at this point are expensive.
And in Germany, and even that was in Bronco, Billy's, which is a little later in the process than Germany and.
In Germany, we're trying not to make any changes at all.
Okay.
Yes, Jason.
One, let's just let's split the construction guys built it.
They are building it now.
<unk>.
And literally I would say that the.
They had a construction I said the other day is that if you need me to jump on anybody because they are not being timely let me know, but otherwise just.
We told you the built right.
I will do it.
Yes.
What's your last question there David yes. Thanks.
So just just so I get the sports wagering stuff right. So with this new circa deal obviously, it's going to kick in when once the temporary opens it will be $9 million on sports sports wagering within <unk>.
Upside if you get additional partners in Indiana, and Colorado for those two skins, and then upside also on on circa so it's kind of $9 million at minimum with upside as that kind of the right way to think about sports wagering.
There is a gap we lose Churchill may 15, well.
The 9 million doesn't have Churchill in it yes, right, yes, no, but you run rate I am just saying run rate. Yes, yes. We're currently seven we're going to lose three and we pick up five that's right, but theres several months here, where we are at four.
Yes, yes, yes.
The way to think about like the like the <unk>.
This case kind of run rate with potential.
We're getting those other ones back.
And we will get something for the other skin.
Don't have it under contract and get a modest correction to what you saw there David technically we share the revenue with all of the skins. So it's not it's not just potential for additional upside with circa potential upside with all of them, but you are right, it's $9 million with more to come hopefully, okay, alright, guys. Thanks a lot.
Got it thanks, David and thank you everyone. This concludes.
A question and answer session I'll now turn the conference back over to Dan Lee for any closing remarks.
No I wish it were a brighter day in the market because I think we have a.
Pretty good situation here.
But.
We got taken down along with everyone else and.
Hopefully, we'll grow out of it eventually so.
Thank you everybody for listening to us on a rough day.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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Yes.
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Yes.
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Okay.
Yeah.
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